Changes in aggregate food demand over the business cycle

Abstract

The globally flexible Fourier functional form is used to provide estimates of how substitution between types of food varies over time. Estimates of Morishima elasticities of substitution between food and nonfood aggregates often show considerable variability over time, typically during recessions. In contrast, estimates from locally flexible functional forms only provide estimates at a single data point and fail to provide insight into changes in substitution over the sample. Evidence of changes in substitution over time has important policy implications, especially attempts to encourage increased consumption of fruits and vegetables.

Keywords:

• food substitution
• Morishima elasticity
• Fourier flexible form
• recessions

JEL Classification:

• E21
• C14